2023 (8) TMI 104 - HC - GST

Provisional Tax Attachment Order Challenged: Procedural Objections Allowed Under CGST Act Rule 159(5)

The HC examined a provisional attachment order under CGST Act, challenging its validity due to procedural irregularities. The Court directed the ... Provisional attachment of current account of petitioner - impugned order proceeds on the premise that proceedings under Section 122 of CGST Act have been launched against the petitioner through no show cause notice in form DRC-01 under Rule 142 has been issued so for - HELD THAT:- It is found that Rule 159 of the CGST Rules, 2017 sets out the procedure to be followed for issuing a provisional attachment order. Under Rule 159 (5) a person whose property is attached may within 7 days of such attachment, file an objection to the effect that the property attached was or is not liable to attachment. After such objection is filed, the Commissioner is required to offer the person objecting an opportunity of being heard and thereafter pass appropriate order in Form GST DRC-23, if he is of the view that property is required to be released from attachment. Clearly the petitioner has approached this Court without availing the aforementioned remedy available under the law - it is noted that the Bank account of the petitioner has remained under attachment since long once under order dated 02.04.2022 and thereafter under the order dated 21.04.2023 but partially the petitioner herself is to be blamed for not taking recourse to Rule 159 (5) of the Rules early - Since the bank account of the petitioner has remained attached since April 2022, it is deemed appropriate to direct the petitioner to approach the respondent no. 1 within two weeks from today, under Rule 159 (5) by filing objections the respondent no. 1 shall make all endeavour to take a decision thereupon as per law expeditiously preferably within three weeks of filing such objection under Rule 159 (5) of the CGST rules, 2017. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether a provisional attachment of a bank account under Section 83 of the CGST Act, 2017 read with Rule 159(1) of the CGST Rules, 2017 is sustainable where the person affected is not a taxable person and no adjudicatory proceedings have been completed against that person. 2. Whether an attachment order issued without a Document Identification Number (DIN) in purported non-compliance with departmental circulars renders the attachment invalid. 3. Whether a writ petition under constitutional jurisdiction can be entertained without the petitioner first availing the statutory remedy of filing an objection under Rule 159(5) of the CGST Rules, 2017 against provisional attachment. 4. Whether an attachment order that initially operated for one year and thereafter another attachment was issued requires specific scrutiny for expiry/continuation under Section 83(2) of the CGST Act, 2017. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of Provisional Attachment under Section 83 and Rule 159 (liability of person not being taxable & absence of completed proceedings) Legal framework: Section 83 empowers provisional attachment of property to protect revenue; Rule 159 prescribes the procedure for provisional attachment, including issuance of order and subsequent objection mechanism. Section 2(107) defines 'taxable person.' Precedent Treatment: Both sides relied upon decisions addressing attachment in revenue-protection contexts (including decisions cited by parties that declare attachment without notice or where ingredients are absent may be vitiated). The Court referred to authorities recognizing procedural safeguards and availability of remedy under Rule 159(5). Interpretation and reasoning: The Court acknowledged allegations that the PAN of the petitioner was used in registrations of various firms and that departmental queries were raised during investigation. However, rather than adjudicating whether the petitioner was a taxable person or whether the substantive ingredients for attachment were satisfied, the Court focussed on the availability and adequacy of the statutory objection remedy under Rule 159(5). The Court noted absence of a concluded proceeding against the petitioner but held that Rule 159(5) provides an expeditious mechanism to seek release and to test the merits of the attachment. Ratio vs. Obiter: Ratio - the proper course where provisional attachment is disputed is to invoke the objection procedure under Rule 159(5) and seek release thereunder as the primary statutory remedy; the Court will not ordinarily exercise extraordinary writ jurisdiction without proof of exhaustion of or inaction in the statutory remedy. Obiter - observations on whether the petitioner is or is not a taxable person and whether the substantive ingredients for attachment were present were not finally adjudicated. Conclusions: The attachment's legality on merits was not finally determined; the Court required the petitioner to file objections under Rule 159(5) so the Commissioner may decide expeditiously. The decision establishes that challenge to provisional attachment should in the first instance proceed under Rule 159(5). Issue 2 - Requirement of DIN on Attachment Order (compliance with departmental circulars) Legal framework: Departmental circulars require issuance of orders with a DIN for authenticity and traceability; statutory scheme under CGST Rules prescribes Form and procedure for attachment orders. Precedent Treatment: The petitioner relied on authorities holding that non-compliance with departmental or statutory formalities (such as absence of DIN) may vitiate orders; the Court acknowledged these contentions were raised. Interpretation and reasoning: The Court recorded the contention that the impugned order lacked a DIN in alleged breach of circulars but did not expressly rule that the absence of a DIN invalidated the attachment. Instead the Court emphasized recourse to Rule 159(5), effectively treating procedural objections (including DIN non-compliance) as matters to be raised and decided in the objection process. Ratio vs. Obiter: Obiter - the Court did not lay down a binding rule on the legal consequence of absence of DIN; rather the failure to directly adjudicate the DIN point and the direction to follow Rule 159(5) makes statements on DIN compliance incidental. Conclusions: The Court did not annul the attachment on the basis of alleged DIN non-compliance; the petitioner must raise such procedural infirmities through the objection mechanism under Rule 159(5) for administrative decision by the Commissioner. Issue 3 - Obligation to exhaust statutory remedy under Rule 159(5) before invoking writ jurisdiction Legal framework: Rule 159(5) permits a person whose property is attached to file an objection within seven days; the Commissioner must offer hearing and may pass an order in Form GST DRC-23 for release. Constitutional writ jurisdiction under Article 226 remains available but is discretionary and normally requires exhaustion of efficacious statutory remedies. Precedent Treatment: The Court considered contrary authorities cited by the parties - some recognizing primacy of statutory objection routes and others permitting writ jurisdiction in exceptional circumstances. The Court relied on precedent emphasizing that statutory objection under Rule 159(5) is the primary and efficacious remedy. Interpretation and reasoning: The Court held that the petitioner had not availed Rule 159(5) and observed that the bank account had been under attachment since April 2022. The Court found it appropriate to direct the petitioner to file objections under Rule 159(5) within two weeks and directed the Commissioner to decide expeditiously, preferably within three weeks of filing such objection. The Court rejected the contention that immediate writ relief was warranted without first using the prescribed objection procedure. Ratio vs. Obiter: Ratio - where a specific and efficacious statutory remedy exists (Rule 159(5)), the Court will expect parties to invoke that remedy before entertaining writ relief; the Court can, however, grant directions to secure expeditious decision-making on such objections. Obiter - general statements about when exceptional writ relief may be appropriate were not elaborated. Conclusions: The Court required exhaustion of Rule 159(5) remedy and provided a timeline for both filing objections and for departmental decision, thereby preserving the statutory process and ensuring expeditious administrative adjudication. Issue 4 - Continuation of attachment beyond one year and interplay with Section 83(2) Legal framework: Section 83(2) contemplates that a provisional attachment order ceases to operate after one year unless continued or reissued according to law; procedural compliance is required to extend or reattach where justified. Precedent Treatment: The parties alluded to the temporal limits of provisional attachments; the Court noted the factual sequence: an initial attachment dated 02.04.2022 and a subsequent order dated 21.04.2023. Interpretation and reasoning: The Court noted that the account remained under attachment since April 2022 and that the petitioner did not earlier invoke available objections. Rather than conducting a detailed statutory-timeframe invalidity inquiry on the present record, the Court directed the statutory remedy be pursued promptly so the Commissioner can determine whether continued attachment is justified in law, thereby indirectly addressing concerns about continuation post-one-year. Ratio vs. Obiter: Obiter - the Court did not conclusively rule on whether the later order complied with the limitations in Section 83(2); instead it mandated administrative reconsideration via Rule 159(5). Ratio - administrative re-evaluation under the prescribed procedure is the appropriate forum to determine lawfulness of continued attachment beyond one year. Conclusions: The Court did not quash the later attachment on the record but required prompt objection and decision to address any infirmity arising from continuation or reattachment after one year. Overall Disposition and Practical Direction The Court disposed of the writ petition by directing the petitioner to file objections under Rule 159(5) within two weeks and directed the Commissioner to decide expeditiously, preferably within three weeks of receipt. No costs were awarded. The Court's operative approach is that procedural and substantive challenges to provisional attachments are to be addressed first through the statutory objection mechanism; judicial intervention will be limited where an efficacious statutory remedy remains available and unexhausted.